Delhi High Court - Orders
Pr. Commissioner Of Income Tax, Delhi - 1 vs At & T Global Network Srervices (India) ... on 16 December, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Dharmesh Sharma
$~9
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 288/2018
PR. COMMISSIONER OF INCOME TAX,
DELHI - 1 .....Appellant
Through: Mr. Vipul Agrawal, SSC.
versus
AT & T GLOBAL NETWORK SRERVICES (INDIA) PVT.
LTD. .....Respondent
Through: Mr. Sachit Jolly, Mr. Rishabh
Malhotra & Ms. Soumya Singh,
Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE DHARMESH SHARMA
ORDER
% 16.12.2024 CM APPL. 71573/2024 (Admission Of Addl. Question Of Law) Bearing in mind the disclosures made, the application is allowed.
The application stands disposed of.
ITA 288/20181. We take note of the questions posed for our consideration as well as the detailed order passed on 29 July 2024 in Pr. Commissioner of Income Tax, Delhi-1 v. AT&T Global Network Services (India) Pvt. Ltd.1 and in terms of which the solitary question on which the said appeal came to be admitted pertained to Section 36 (1)(iii) of the Income Tax Act, 19612.
1 ITA 364/2018 2Act ITA 288/2018 Page 1 of 5 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/12/2024 at 00:27:14
2. In the present appeal, the following questions of law have been posited for our consideration: -
"A. Whether on the facts and circumstances of the case, the Tribunal is correct in law in deleting the addition made by the TPO/DRP on account of payment of service charges for intra- group services, holding that such payment was for commercial expediency?
B. Whether on the facts and circumstances of the case, the Tribunal was correct in law in holding that the TPO had recharacterized the intra-group service transactions?
C. Whether on the facts and circumstance of the case, the Tribunal was correct in law in deleting the disallowance of interest of Rs. 80,62,508/- incurred in connection with ECBs availed during the year, holding the same to be for 'expansion' and not 'extension' of existing business in terms of proviso to section 36(1)(iii) of the Act?
D. Whether on the facts and circumstances of the case, the· Tribunal was correct in law in deleting the disallowance of Rs, 32,17,25Son account of circuit accrual charges, in violation of the ratio laid down by the apex Court in the case of Rotork Controls India Pvt. Ltd. v. CIT: 314 ITR 62 without appreciating that provision was made on estimate basis?
E. Whether on the facts and circumstances of the case, the Tribunal was correct in law in deleting the disallowance of Rs. 23,68,651 made on account of unascertained year-end provisions, in violation of the ratio laid down by the apex Court in the case of Rotork Controls India Pvt. Ltd. v. CIT: 314 ITR 62, without appreciating that provision was made on estimate basis?
F. Whether on the facts and circumstances of the case, the Tribunal was correct in law in deleting the disallowance of Rs. 23,10,71,248, being the amortized portion of annual revenue-share based license fee, treating the entire license fee as an allowable expense under section 37(1) of the Act;
G. Whether on the facts and circumstances of the case, the Tribunal was correct in law in holding that the license fee paid for maintenance and usage of license fee was a recurring fee in the nature of allowable revenue expenses?
H. Whether on the facts and circumstances of the case, the order of the Tribunal is perverse and based on incorrect appreciation of facts and legal principles?"
3. In the present appeal, Mr. Aggarwal, learned counsel appearing for the appellant craves liberty to press certain additional points. From the chart which has been placed for our consideration and in which ITA 288/2018 Page 2 of 5 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/12/2024 at 00:27:14 additional questions are sought to be identified, Mr. Aggarwal essentially raises the issue pertaining to disallowance of unascertained year-end accruals and disallowance of annual revenue-share based license fee. These questions, according to learned counsel, arise additionally in this appeal.
4. Insofar as the question in respect of disallowance of unascertained year-end accruals is concerned and which is dealt with in question „E‟, we note that the Dispute Resolution Panel3 had categorically recorded that the respondent-assessee had chosen not to press a challenge to that disallowance. This becomes evident from the reading of the following recital which appears at pdf page 356 of our digital record: -
"13. The assessee preferred objection before the Dispute Resolution Panel who vide direction dated 16.12.2014 vide para No.8 has held as under:-
8.2 This issue has been discussed by the AO in para 11 of the draft assessment order.
During the course of proceedings before the Panel, though the Ld. AR of the taxpayer made this ground as part of the slide deck but did not press this ground of objection. Under these facts and in the absence of submission of any evidence to justify the allowability of the sum of Rs. 8,18,364/- towards salary payable and Rs.15,50,287/- towards SIP accruals, adding up to Rs.23,68,651/- the Panel holds that the disallowance proposed by the AO on this account is rightly made."
5. Furthermore, and even though the said recital was not questioned as per the procedure envisaged in law, the Income Tax Appellate Tribunal4 has chosen to delve into the aforesaid issue and 3 DRP 4 Tribunal ITA 288/2018 Page 3 of 5 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/12/2024 at 00:27:14 has remitted the matter to the Assessing Officer5. Prima facie, we find that the procedure as adopted would not sustain even when tested on the basis of the Rule 10 of the Income Tax Appellate Tribunal Rules, 19636 and which was cited for our consideration by Mr. Jolly, learned counsel for the respondent-assessee. The appeal would, consequently, merit admission on question „E‟.
6. That takes us then to question „F‟ and which is concerned with the amortization of the annual revenue-share based license fee. This aspect too would merit consideration in light of the decision rendered by the Supreme Court in the case of Commissioner of Income Tax v. Bharti Hexacom Ltd7.
7. We, consequently, admit this appeal on the following questions of law:-
A. Whether the Tribunal was justified in remitting the matter to the AO in respect of a ground which was never pressed or urged before the DRP?
B. Whether and notwithstanding no steps having been taken for rectification of the minutes of the DRP, Rule 10 could have permitted the Tribunal delving into that question? C. Whether in the facts and circumstances of the case, the Tribunal was correct in law in deleting the disallowance of INR 32,17,258/- on account of circuit accrual charges in violation of the Supreme Court decision in Rotork Controls India Private Limited v. Commissioner of Income Tax, Chennai [(2009) 13 SCC 283]?
D. Whether in the facts and circumstances of the case, the 5 AO 6 1963 Rules ITA 288/2018 Page 4 of 5 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/12/2024 at 00:27:14 Tribunal was correct in law in deleting the disallowance of INR 23,68,651/- made on account of unascertained year-end provisions in violation of the Supreme Court decision in Rotork Controls without appreciating that the provision was made on an estimate basis?
E. Whether in the facts and circumstances of the case, the Tribunal was correct in law in deleting the disallowance of INR 23,10,71,248/- being the amortized portion of annual revenue- share based license fee, treating the entire license fee as an allowable expense under Section 37(1) of the Act?
8. Let this appeal be called again on 25.02.2025.
YASHWANT VARMA, J.
DHARMESH SHARMA, J.
DECEMBER 16, 2024 Ch 7 2023 SCC OnLine SC 1340 ITA 288/2018 Page 5 of 5 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/12/2024 at 00:27:14